Friday, July 3, 2009

Futures Fund Manager Pleads Guilty in $20 Million Scam

June, 2009

By ROBERT WOODMAN MCSHERRY, Andrews Publications Staff Writer

The operator of a suburban Philadelphia investment fund that promised returns of up to 18 percent trading stock-index futures contracts has admitted that he defrauded investors of $20 million.

Joseph S. Forte, 54, pleaded guilty in the U.S. District Court for the Eastern District of Pennsylvania to running a Ponzi scheme out of his Broomall home from 1996 to 2008.

During that time he allegedly raised $80 million from investors and stole $20 million of it, according to a criminal information filed in the Philadelphia federal court.

The court filing says he used money from new customers to pay "returns" to existing investors, lost millions of dollars trading stock futures, and diverted millions more to his own personal use.

Forte allegedly kept his investors in the dark by sending them bogus account statements that showed their money was safe and growing. Some statements showed that the fund had $154 million when it was actually worth less than $150,000, the criminal information says.

Forte also used some of the money to buy a seashore vacation home in New Jersey and to make donations to several Philadelphia-area schools, according to federal prosecutors.

The criminal information further accuses him of defrauding Commerce Bank on a $500,000 personal loan by telling the bank that his company had $3.5 million when he knew its account was empty.

"While paying himself millions of dollars, this defendant created scores of victims - the innocent investors, the unsuspecting financial institutions and the unwitting recipients of stolen money that he laundered," Philadelphia U.S. Attorney Laurie Magid said in a statement.

Forte turned himself in to authorities in December and confessed to misrepresenting his investment company's trading performance, according to prosecutors.

At that time, he was charged with mail fraud in a criminal complaint filed in the District Court.

The recent criminal information charged him with two counts of mail fraud, one count of bank fraud and one count of money laundering.

Plea documents filed in the case were blocked from online inspection and are apparently under seal.

Prosecutors said Forte faces an 80-year sentence, a $1.75 million fine, $20 million in restitution and forfeiture of all proceeds traceable to the fraud, including his home in Broomall and shore house in Sea Isle City, N.J.

Sentencing is set for Oct. 2 before U.S. District Judge Jan E. Dubois.

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United States v. Forte, No. 09-CR-00304, guilty plea entered (E.D. Pa., Phila. June 5, 2009).
White Collar Crime Reporter
Volume 23, Issue 10

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